Correlation Between China Changjiang and FTC Solar

Can any of the company-specific risk be diversified away by investing in both China Changjiang and FTC Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Changjiang and FTC Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Changjiang Mining and FTC Solar, you can compare the effects of market volatilities on China Changjiang and FTC Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Changjiang with a short position of FTC Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Changjiang and FTC Solar.

Diversification Opportunities for China Changjiang and FTC Solar

0.0

Correlation Coefficient

China Changjiang  FTC Solar

Pay attention - limited upside

The 3 months correlation between China and FTC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Changjiang Mining and FTC Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTC Solar and China Changjiang is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Changjiang Mining are associated (or correlated) with FTC Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTC Solar has no effect on the direction of China Changjiang i.e., China Changjiang and FTC Solar go up and down completely randomly.

Pair Corralation between China Changjiang and FTC Solar

If you would invest  217.00  in FTC Solar on September 5, 2024 and sell it today you would earn a total of  86.00  from holding FTC Solar or generate 39.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

China Changjiang Mining  vs.  FTC Solar

China Changjiang Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Changjiang Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, China Changjiang is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

FTC Solar

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FTC Solar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, FTC Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Changjiang and FTC Solar

The main advantage of trading using opposite China Changjiang and FTC Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Changjiang position performs unexpectedly, FTC Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FTC Solar will offset losses from the drop in FTC Solar's long position.

The idea behind China Changjiang Mining and FTC Solar pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.